A loan against property is a secured type of loan that enables you to access funds almost conveniently, provided you are the legal owner of your property. It requires you to pledge your property as collateral to get a loan. It is one of the best options available to manage your finances in times of a financial crunch. Your loan amount depends upon the market value of your commercial or residential property.
The best part is that it serves multiple purposes. It means that you can get a loan to pay for anything you want. For instance, you can cover the cost of a medical emergency, fund your child’s higher education, wedding, home renovation, car repair, or debt consolidation. Also, the process of applying for a loan is easy. You can fill in your application and submit your documents from the comfort of your home. However, you must meet the loan against property eligibility criteria to avail of quick approval.
Factors affecting loan against property eligibility
Your loan against property eligibility depends upon several factors, such as loan amount, repayment tenure, income, credit score, age, etc. Here are the tops factors affecting your eligibility for a loan.
- Repayment tenure
The loan against the property’s repayment tenure generally ranges between 3 years to 23 years depending on your lender. You can choose a loan tenure based on your needs. However, it is worth noting that a longer loan tenure improves your eligibility for a loan. Further, if you choose a shorter loan tenure, you will have to save money on interest, but your eligibility for your preferred loan amount will decrease.
You can apply for a Muthoot loan against a property that offers longer loan tenure. If you are young, you can get a tenure that can go up to 23 years. Keep in mind that the closer you are to your retirement age, the lower will be your loan repayment tenure.
- Property’s age
There is an age limit for how long your property can be used as collateral. It means that your loan tenure can not exceed the age limit required by your lender. If your property is old, you may get a lower loan tenure and loan amount as the value of your property will be lower. Also, before approving your loan application, your lender will consider your property’s age to determine your loan against property eligibility.
- Income Tax Return
Another factor that affects your loan against property eligibility is your income tax returns. It is mandatory to have filed income tax returns for at least two years to apply for a LAP loan. You will need to submit your bank statements and other documents to prove a steady flow of income.
It is one of the crucial factors affecting your loan against property eligibility. Before approving your application, your lender checks your income flow to determine your repayment capacity. If you have a property flow of fixed income, it warrants your approval for a loan. Having a stable income minimizes the risk of default. Although your lender can recover the loan amount by selling your property, they generally avoid that option.
- Mortgage insurance
If you are taking a loan against a property, it would be wise to get mortgage insurance. The benefit of getting mortgage insurance is that it reduces the risk for the lender and you as a borrower. Having insurance increases your chances of getting approval for a loan against a property.
- Interest rates
When you apply for a loan against a property, you can choose between a fixed interest rate and a floating interest rate. A fixed interest rate remains the same through the loan tenure. Whereas, a floating rate keeps changing depending on the market condition. If you are choosing a longer loan tenure, it is advisable to get a floating interest rate.
Generally, lenders favour borrowers with co-applicants in their applications. It reduces the risk of defaulting on repayment. A co-applicant can be your spouse, children, or parents. If you have a low credit score, it would be wise to apply for a loan against a property with a co-applicant. It significantly improves your chances of loan approval.
- Additional charges
Your interest rate is not the only cost associated with your loan application. There are other fees that you would have to bear, such as processing fees, GST, prepayment charges, and renewal charges. It is imperative to get a breakup of fees that your lender will levy. It enables you to know the actual cost of borrowing.
Getting a loan against property is easy and hassle-free. You can submit your application from the comfort of your home. However, you will need to meet your loan against property eligibility to get a loan amount and interest rate based on your needs.
To avail of the best benefits, you may want to apply for a Muthoot loan against property. It is the most efficient approval and disbursal process to get a loan.